IN THE SUPREME
COURT OF BRITISH COLUMBIA

Date: 20140502

Docket: M104052

Registry: Vancouver

Between:

Ronald Wayne Desharnais

Plaintiff

And:

Shannon Parkhurst and John Romanowski

Defendants

And:

Insurance Corporation of British
Columbia

Third Party

– and –

Docket: M104053

Registry: Vancouver

Between:

Ronald Wayne Desharnais

Plaintiff

And:

Daniel Francis McCaffrey

Defendants

Before: The Honourable Mr. Justice
A. Saunders

Reasons for Judgment
Re: Costs

[1]            
A trial assessing damages arising out of two motor vehicle accidents proceeded
before a jury over the course of thirteen days in August 2011.

[2]            
Liability had been admitted on behalf of the defendant McCaffrey, in the
action arising out of the first of the two accidents. The defendants Parkhurst
and Romanowski did not defend the second action, and the third party Insurance
Corporation of British Columbia (“ICBC”) did not dispute liability. The jury
found those defendants liable for the second accident.

[3]            
The jury awarded the plaintiff non-pecuniary damages of $22,500 against
the defendant McCaffrey and of $2,500 against the defendants Parkhurst and
Romanowski. It awarded special damages of $5,100 in respect of both actions.
The damages totalled $30,100.

[4]            
The plaintiff appealed these awards. The appeal was heard in December
2012 and was dismissed in March 2013, with reasons indexed at 2013 BCCA 113.

[5]            
The jury award was less than either of two formal settlement offers made
by McCaffrey and ICBC (collectively, the “Applicants”) prior to trial. The
Applicants seek an order depriving the plaintiff of his costs after the date of
delivery of either of the two offers. Such orders are in accordance with
subrule 9-1(5)(a) of the Supreme Court Civil Rules, which gives the
court the discretion, where an offer to settle has been made, to deprive a
party of any or all of the costs, including any and all of the disbursements,
to which they would otherwise be entitled. The Applicants further ask to be
awarded their costs following delivery of either of the offers, in accordance
with subrule 9-1(5)(d). The Applicants do not seek double costs.

[6]            
Notwithstanding the judgment amount having fallen short of the offers,
the plaintiff seeks his costs throughout, including the costs of the trial.

[7]            
The Applicants’ “First Offer”, made on July 12, 2010, was in the amount
of $50,000, plus costs and disbursements. At that time the trial was scheduled
to commence in September 2010. Two weeks after the First Offer was delivered,
the trial was adjourned by consent. It was subsequently ordered at a Case
Planning Conference held September 16, 2010 that the actions proceed to trial
commencing August 2, 2011.

[8]            
A mediation was held in September 2010. The Notice to Mediate had been
delivered by the Applicants in April 2010. The mediation was not successful;
the parties were unable to reach agreement.

[9]            
On April 28, 2011, the Applicants delivered the “Second Offer”, in the
amount of $75,000 plus costs and disbursements

[10]        
To put the settlement offers in perspective, I note that counsel for the
Applicants, in his submissions on costs, asserted that it is common ground that
the plaintiff was looking for a settlement in the range of $1 million, and
sought more than that during the course of trial. Counsel for the plaintiff did
not demur from this assertion.

[11]        
A brief description of the nature of the plaintiff’s claim and the
evidence will give context to the parties’ submissions on costs.

[12]        
The plaintiff had been employed as a commercial pilot for 29 years, and
at the time of trial was an experienced airline captain. He had gone on stress
leave in November 2005, and was still off work at the time of trial. The
stressors in his life had initially been identified as including his failure to
pass simulator tests for piloting a new-generation aircraft, but there was
evidence that early on in his stress leave he was reported to have been
suffering suicidal ideation and nightmares involving crashing planes, and his
commercial pilot’s license was suspended. He had been prescribed various
anti-depressants that would have prevented him from flying, and by the time of
trial he was still on one of those medications.

[13]        
The chief injury alleged to have been caused by the two motor vehicle
accidents was an injury to the plaintiff’s lower back. The plaintiff had
pre-existing spondylolisthesis, but it was asymptomatic until the late spring
or early summer of 2006. On May 26, 2006 – about one month before the first of
the two motor vehicle accidents – the plaintiff had injured his back when
driving a motorcycle up a grassy slope. The injury was severely painful, and he
was treated at Burnaby General with an intramuscular morphine injection. The
first of the subject accidents was on June 29, 2006; he was riding a motorcycle
in a parking lot and was knocked to the ground. The plaintiff subsequently
underwent various forms of treatment for back pain, including physiotherapy and
cortisone injections. His back injury was aggravated in the second motor
vehicle accident, on August 14, 2007, when one of the defendants backed his car
into the plaintiff’s motorcycle. The plaintiff ultimately underwent an L5-S1
fusion on February 23, 2010. His back pain was continuing at the time of trial
in August 2011.

[14]        
The recent evolution of the Rules regarding the effect of settlement
offers on costs is summarized in Roach v. Dutra, 2010 BCCA 264 at paras. 31
– 52, and in Ward v. Klaus, 2012 BCSC 99, at paras. 20 – 35. The
rules, in their present form, provide for the exercise of broad discretion by
trial judges, subject to certain guiding principles. Subrule 9-1(6) sets out
factors which the court may consider in making such an award:

(a) whether the offer to settle was one that ought reasonably
to have been accepted, either on the date that the offer to settle was
delivered or served or on any later date;

(b) the relationship between
the terms of settlement offered and the final judgment of the court;

(c) the relative financial
circumstances of the parties;

(d) any other factor the court
considers appropriate.

[15]        
Neither party contests the relevance of factor (b). Both offers exceeded
the judgment amount, the Second Offer by an order of magnitude.

[16]        
With respect to the First Offer in particular, the plaintiff says that it
could not reasonably have been accepted upon receipt, or afterwards, as the
plaintiff had not recovered from his surgery and his prognosis was unknown. The
plaintiff’s neurosurgeon Dr. Lee provided plaintiff’s counsel with a
letter dated May 10, 2010 – written, apparently, in support of an intended
motion to adjourn examinations for discovery – in which Dr. Lee stated
that the plaintiff had not fully recovered and had not reached a plateau in his
recovery.

[17]        
However, in June 2010 Dr. Lee provided counsel with a medical-legal
report, in which he opined, among other things, that Mr. Desharnais had
experienced some improvement; that some degree of low back pain could be
expected to continue for the foreseeable future; that it was unlikely that the
surgery would eliminate his symptoms altogether; that successful bony healing
was probable, though not assured, and that if fusion was not successful,
increased chronic pain would likely result.

[18]        
Dr. Lee also noted that the plaintiff had been able to return to
riding motorcycles, though the duration and types of road conditions he was
able to withstand were both limited.

[19]        
There is no evidence from the plaintiff that he considered his prognosis
so uncertain that he was unable to evaluate the First Offer. It may have been
reasonable for the plaintiff to await receipt of Dr. Lee’s report until responding
to the First Offer, but after that the prognosis offered by Dr. Lee cannot
be said to have been so uncertain that an assessment of the First Offer could
not reasonably have been undertaken. Indeed, the fact that the plaintiff
participated in mediation in September 2010 is some indication that the
plaintiff felt able to evaluate the evidence and the strength of his case in
the light of his condition.

[20]        
The plaintiff also cites as a factor in his favour the disparity in
financial resources between himself and the third party ICBC.

[21]        
The authors of British Columbia Supreme Court Rules Annotated, 2014
(Carswell, 2013) comment, at p. 314, that the reason for the inclusion of
this criterion in the subrule is that consideration of relative financial
circumstances may assist in the determination of whether ordinary costs (as
distinct from double costs) will be sufficient to achieve the purposes of the
costs rules. The principle cases to have considered this aspect of the subrule
– Bailey v. Jang, 2008 BCSC 1372; Smith v. Tedford, 2010 BCCA 302,
which overruled Bailey; and Martin v. Lavigne, 2010 BCSC 1610 –
are cases where double costs were being sought. However, the subrule is not so
limited on its face, and there are decisions where financial circumstances have
been considered in the context of a claim limited to ordinary costs, e.g. Ward;
Gonzales v. Voskakis, 2013 BCSC 675.

[22]        
The plaintiff asks that I give particular consideration to the amount he
has had to pay his counsel for disbursements, which totalled approximately
$132,000. It appears from the invoices in evidence that approximately $23,600
in disbursements was incurred prior to the First Offer and a further $10,750
approximately incurred prior to the Second Offer. Of the balance, it appears
that approximately $42,000 related to the attendance of expert witnesses at
trial.

[23]        
The plaintiff’s counsel allowed him to pay the disbursements account in
installments beginning in October 2011. There is no evidence as to how the
plaintiff was able to accomplish this. There is no evidence that he has become
impoverished as a result.

[24]        
I do not find the factor of the relative financial circumstances to
weigh substantially in the plaintiff’s favour. The plaintiff has been living on
disability benefits of $4,800 per month since before the subject accidents. His
benefits are being garnished by his former spouse, and he is supporting two children
who are in university. The evidence does not disclose what savings or other
assets he has, except that his ability to remortgage his former matrimonial
home has been frustrated due to lack of cooperation on the part of his former
spouse, who is still on title. He does not appear to be or to have become
impecunious; the evidence at trial was that he has been able to enjoy vacations
abroad, and was still engaged in his hobby of collecting and riding
motorcycles. Counsel conceded in argument that this is not the plaintiff’s
strongest point.

[25]        
The plaintiff’s main point on this application is that the plaintiff’s
expert evidence supported the plaintiff’s expectation of a substantial damages
award, greatly in excess of either of the two offers. It is submitted that the
reasonableness of the Applicants’ settlement offers must be evaluated in light
of that expert opinion evidence. Both in the periods before the First Offer,
and up to delivery of the Second Offer, the plaintiff had received expert
opinion reports from his physicians – his neurosurgeon Dr. Lee, and his neurologist
Dr. Donald Cameron – that the two motor vehicle accidents were the main
contributors to his physical disability. A psychiatrist, Dr. Griffin, had
diagnosed the plaintiff as suffering from post-traumatic stress disorder, and
opined that the accidents had played a role in its onset. Further supportive
medical reports, it is argued, were received following the Second Offer: these
included opinions from his family physician, Dr. Ian Cameron, and from a
certified independent medical examiner, Dr. Watt, attributing the back
injury to the two subject accidents, and an opinion from a psychologist, Dr. Nader,
that the plaintiff was suffering psychological issues including a fear of motor
vehicle travel.

[26]        
The Applicants reply that the plaintiff ought to have appreciated that
his expert reports were highly problematic in several respects.

[27]        
Drs. Lee, Watt and Donald Cameron had prepared their reports with incomplete
information as to the severity of the May 2006 injury; they were not given the
hospital treatment record, and they did not know that as late as June 10, 2006
– less than three weeks before the first of the two accidents – the plaintiff
was disclosing the May 2006 injury to a counsellor as a “presenting complaint”.
The Applicants submit – correctly, in my view – that those experts
substantively modified, or even resiled from, their opinions when evidence
suggesting the true extent of the May 2006 injury was put to them in
cross-examination.

[28]        
The opinion of the family physician included a statement of the
plaintiff’s history that was shown at trial to be glaringly inconsistent with
the physician’s own clinical notes, on a number of points.

[29]        
The opinion of Dr. Nader as to the plaintiff’s fear of motor
vehicle travel was shown to be inconsistent with the plaintiff’s own behaviour.

[30]        
The psychiatrist’s opinion as to the PTSD diagnosis was shown to be
inappropriate, as the recognized diagnostic criteria had not been met; counsel
acknowledged this in his closing submissions to the jury, and did not ask the
jury to place any great reliance on that opinion.

[31]        
Finally, with respect to the medical evidence, the Applicants point to
the fact that the opinion of their own expert, Dr. Regan, that the
plaintiff’s back problems pre-dated the first accident, had been disclosed
prior to delivery of the First Offer.

[32]        
The Applicants also point to other features of the plaintiff’s case that
presented serious obstacles to proving both causation in respect of the back
injury or the reason for the plaintiff’s inability to return to work as a
pilot. For example, they point to the evidence that before the First Offer was
made the plaintiff had encountered problems with Canada Customs over valuation
of a motorcycle he imported, as a result of which he was required going forward
to undergo secondary customs checks. This, it was argued at trial, would have
made his return to work as a pilot much more problematic.

[33]        
The Applicants contend that these and other factors support a finding
that the plaintiff ought reasonably to have accepted the First Offer, or
alternatively the Second Offer.

[34]        
The purposes of costs rules were summarized by Frankel J.A. in Giles
v. Westminster Savings and Credit Union, 2010 BCCA 282:

[74] The purposes for which costs rules exist must be kept in
mind in determining whether appellate intervention is warranted. In addition to
indemnifying a successful litigant, those purposes have been described as
follows by this Court:

·       
“[D]eterring frivolous actions or defences”: Houweling
Nursuries Ltd. v. Fisons Western Corp. (1988), 37 B.C.L.R. (2d) 2 at 25
(C.A.), leave ref’d, [1988] 1 S.C.R. ix;

·       
“[T]o encourage conduct that reduces the duration and expense of
litigation and to discourage conduct that has the opposite effect”: Skidmore
v. Blackmore (1995), 2 B.C.L.R. (3d) 201 at para. 28 (C.A.);

·       
“[E]ncouraging litigants to settle whenever possible, thus
freeing up judicial resources for other cases: Bedwell v. McGill, 2008
BCCA 526, 86 B.C.L.R. (4th) 343 at para. 33;

·       
“[T]o have a winnowing function in the litigation process” by
“requir[ing] litigants to make a careful assessment of the strength or lack
thereof of their cases at the commencement and throughout the course of the
litigation”, and by “discourag[ing] the continuance of doubtful cases or
defences”: Catalyst Paper Corporation v. Companhia de Navegação Norsul,
2009 BCCA 16, 88 B.C.L.R. (4th) 17 at para. 16.

[35]        
Further, at paragraph 88 of that judgment, Frankel J.A. remarked
that plaintiffs “… should not be penalized for declining an offer that did not
provide a genuine incentive to settle in the circumstances”. I understand
Frankel J.A. to have meant that it is the magnitude of the offer itself,
in relation to possible outcomes at trial, that is to provide the “incentive”,
and not the costs consequences. It should be noted, however, that this remark was
made in regard to the suitability of an award of double costs; that is the
penalty which was being discussed, not an order awarding or depriving a party
of ordinary costs.

[36]        
The Applicants rely upon a passage from the decision of Goepel J.,
as he then was, in Ward. That decision involved the costs consequences
of a 14-day personal injury trial heard before a judge alone. The defendants
had made two offers, the first for approximately $490,000, and then the second,
a month later and on the eve of trial, for $595,000. Neither offer was
accepted. After delivering the first offer, the defendant incurred
disbursements of approximately $88,000. At trial, the plaintiff sought damages
of more than $1.7 million; the defence submitted that damages should be in the
range of approximately $340,000 to $380,000. The damages award totalled more
than $430,000, falling short of the settlement offers by a considerable margin.
Goepel J. declined to find that the offers ought to have been accepted.
Nevertheless he held that the plaintiff was entitled to costs up to the date of
the first offer, and that each party would bear their own costs thereafter.

[37]        
The Applicants cite paragraph 39 of the reasons in Ward, wherein
the Court said:

…it is with respect difficult to
describe an offer as being “unreasonable” when it provides a better result to
the plaintiff than that which he has obtained at trial. The fact that an offer
does not provide an incentive to settle cannot be determinative.

[38]        
I am in agreement with the latter statement. With the greatest of
respect, however, I believe the former statement falls into the error of
judging the reasonableness of an offer by the standard of the ultimate award.
This approach was ruled incorrect in Bailey v. Jang, 2008 BCSC 1372 (as
Goepel J. noted at para. 37 of Ward). It must also be noted
that the damages in the present case were assessed by a jury, and this court
has in the past noted the difficulties inherent in gauging the reasonableness
of decisions to reject settlement offers according to what a jury might do or
what a jury ultimately does: Lumanlan v. Sadler, 2009 BCSC 142 at para. 35;
Smagh v. Bumbrah, 2009 BCSC 623 at paras. 12-14; Mazur v. Lucas,
2011 BCSC 1685 at para. 60; Wafler v. Trinh, 2012 BCSC 1708, at paras. 33-34
(aff’d, 2014 BCCA 95).

[39]        
There is some merit to the Applicants’ submissions on the weight that thoughtful
counsel might have given the plaintiff’s expert opinion reports. The reports of
the psychologist, of the psychiatrist who diagnosed the plaintiff with PTSD,
and of the family physician were highly suspect in my view. One must always be
careful in judging decisions made by counsel with the benefit of hindsight.
However, I do not think it unfair to say that it could have been anticipated
beforehand that cross-examination of those three witnesses might seriously
undermine the plaintiff’s case.

[40]        
As noted, the Applicants submit that the opinion of their own expert, Dr. Regan,
was disclosed prior to the First Offer. Dr. Regan, however, did not
contend that the two subject accidents had not contributed to the plaintiff’s
current condition.

[41]        
The opinions of the neurologist, the neurosurgeon, and the independent
examiner did prove to be vulnerable to cross-examination due to the absence of
information regarding the May 2006 injury, but I do not think it can be said
that this ought to have been obvious to the plaintiff prior to trial. In Wafler,
Kirkpatrick J.A. wrote at para. 65:

…A plaintiff, in considering an
offer to settle, obviously cannot ignore the evidence against him. But if there
is a reasonable degree of confidence in the evidence that supports his theory,
then it seems to me he should not be unduly penalized when the trier of fact
ultimately accepts evidence to the contrary.

There was clearly some basis, on the evidence, for the
plaintiff having confidence that the award would exceed the offers. Having said
that, it also bears mention that the concern expressed by Kirkpatrick J.A.
with a plaintiff being unduly penalized is with respect to a double
costs award.

[42]        
On the whole, I do not consider either the First or the Second Offer as
having reflected, objectively speaking, a genuine attempt at compromise. I find
them to hae been more reflective of what the Applicants could reasonably have
hoped to achieve if all or substantially all of the issues were resolved in
their favour. I am not dissuaded from taking this view by the fact that the
jury awarded even a lesser amount; I do not think it is unfair to counsel or to
the jury for me to say that the jury’s decision was considerably less than what
reasonably prudent counsel would have regarded as a “win” for the defence. I
cannot find that either offer ought reasonably to have been accepted by the
plaintiff.

[43]        
As Goepel J. stated in Ward, that is the beginning, not the
end of the analysis. The most basic principle underpinning the Rules relating
to costs is that costs of a proceeding are to be awarded to the successful
party (R. 14-1(9)). This expectation is intended to promote sensible conduct
throughout court proceeding; it exists notwithstanding the broad judicial
discretion to depart from the principle, which is generously built into the
Rules.

[44]        
In this case, the jury found that the plaintiff had successfully proven
some damage. But for the offers to settle, he would be entitled to his costs. Having
regard to the factors set out in Rule 9-1(6), including giving some weight to
the plaintiff’s financial circumstances, I do not find that the offers were so
substantial that the Applicants ought to be entitled to any indemnification
against their own costs. The plaintiff’s position was not completely lacking in
merit. It was not frivolous. However, the fact that the settlement offers
exceeded the judgment amount cannot be ignored. The Applicants were forced to
incur the expense of a trial which they were willing to avoid by paying the
plaintiff a not insubstantial sum, a sum which ended up being considerably
greater than the damages the plaintiff was judged to be entitled to. It would
be unfair to require the Applicants to indemnify the plaintiff for the costs of
advancing a claim that was ultimately judged to be greatly overvalued.

[45]        
I find that the plaintiff is entitled to his costs up to the date of
delivery of the Second Offer. The parties will bear their own costs thereafter.

“A. Saunders J.”